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Capital: How did you come up with the idea of starting this revolutionary construction company?
Fikremariam Alemu: Well, it is a long story actually. As you know, here in Ethiopia we have a chronic housing problem. I bought an apartment from a real estate company which I will not mention by name and discovered that the process of delivery was, quite frankly, unnecessarily time consuming. It took me five years to receive the apartment as did my friends who had also bought apartments. Then we came to know about prefabricate housing technology.
From my point of view, housing is a big challenge, especially for people under the age of 45. This is because, in the last couple of years, there has been a lot of change in the price of land acquisition and construction materials which have had considerable impact on people, severely limiting their capabilities to own a house. I have older brothers who are working for the government and other private institutions for good salaries, which here in Ethiopia, would be around 5,000 birr a month. Even with what is considered a good salary, they cannot imagine owning a house right now.
I myself was one of them; I used to be in the same position, but was fortunate enough to acquire some money and become a house owner.
Right now, if you want to rent a mud-built one room flat, it would cost you from around 1,000 birr up to 1,500 birr. Even a studio-type apartment currently could cost you around or more than 2,000 birr. A good villa around Hayat might cost you around 7,000 birr.
Cost of housing should be different in accordance to size, but now, be it big or small, it seems as though the rate is pretty much the same. You just cannot afford it.
The issue of housing became a problem also because of the growing population in Addis Ababa. Most of the service sectors and industries are concentrated in the city. Many job opportunities have been created in Addis Ababa. Because of that fact, many people come to live in the city. The more the influx, the higher the demand for housing, which raises the price range.
Data released by the Addis Ababa Housing Agency a couple of years ago as well as studies done by a research company called Padko Group, confirmed that Addis Ababa needed 700,000 additional houses by 2012. According to the study done by Padko, the number is due to grow to 1.2 million by 2025.
This shows that a revolution is needed to supplant the conventional way of constructing houses, as the conventional way has proved to have too many difficulties.
Based on that study, my friends and I decided that building prefab houses would benefit middle income families as it would be affordable. At the same time this would benefit our country by helping in alleviating the chronic housing problem.
I also came to the decision to be involved in building prefab houses after I did a lot of research on different aspects of the engineering, and found it fascinating. The study took me almost two and half years to complete. I finalized the study by first doing all the feasibility studies myself and I thought it was a revolutionary idea. I really like revolutionary ideas because they come once in a while and tend to bring huge changes.
So I discussed it with some friends and we agreed that it would revolutionize the construction sector. We concluded that if we invested in the idea and promoted it well, we could come up with a big solution for the housing industry. Capital: How fast and cheap will you deliver these houses, then?
Fikremariam: If you take the G+3 apartment building of one of our apartment blocks, which will lie on an area of around 400m2, it would take a minimum of six to nine months to build using current conventional technology with the unskilled labor force we have here. Utilizing the technology we have, it would take us a maximum of 60 days to assemble it. To explain further, the same apartment building which will take us 60 days to assemble using the unskilled labor force we have could be assembled in just 4 days using only expatriates with the necessary expertise. This is a realistic scenario. Cost wise, our aim is to finish assembly as fast as possible, which will allow us to offer a discount of 30 percent from the conventional real estate price.
Capital: You are signing contracts with international companies like New Orlines to provide these prefab houses for projects abroad. Wouldn’t these contracts limit your capacity to build houses here in Ethiopia?
Fikremariam: We are constructing 463 houses in Addis Ababa which will all be delivered by September 2013. We have made a lot of preparations and arrangements and are working day and night to meet the delivery date. We have discovered that starting the process of building is the major obstacle. But once we started construction, we found that things got relatively easier. The major challenges have been acquiring the necessary foreign currency and the signing of the Memorandum of Association (MoA) among shareholders. This took more time than we initially expected or planned for. We did manage to finalize this and are proceeding at a swift pace.
Capital: How did you find the land acquisition process? In what way would it affect your company?
Fikremariam: There’s an artificially inflated market for land. The government does not allow the sale of land as it says it belongs to the people. Many companies, though, have approached us planning to sell the land they have leased from the government to us. But we will never accept such an offer as it is illegal and we are only prepared to lease land from the government. We believe a land has no value. We believe the value of the land is the value invested on it. I know what can be done on a land but I don’t really understand the value of the land.
Capital: How did you get the land at Bole Bulbula and CMC, then?
Fikremariam: It is a joint venture.
Capital: With whom?
Fikremariam: With different companies.
Capital: Can you be a bit more specific?
Fikremeriam: I can be more specific but the agreement with them prohibits me to do so as it is an undisclosed agreement.
Capital: You claim to build houses in just weeks. The general perception is that it can’t be done this fast. Do you think the public’s attitude is changing, in regards to your ambition, as you are moving ahead?
Fikremariam: It is difficult I imagine. Once a wise man [Meles Zenawi] said ambition is just an ambition when it isn’t realized. But ambition, when it bears fruition, becomes a plan; therefore, ours is a plan, not an ambition. [Meles said this when asked about the Growth and Transformation Plan (GTP)]. If we have said we will have a factory after sometime, that is an ambition. But we have already bought factory machinery and will finish the construction of the factory itself in less than a month’s time. If I say I am building 463 houses which should be finalized by September 2013, it is not an ambition but a plan as I have already bought the factory, the steel required and have trained the necessary people. I don’t agree with it being an ambition. I would rather say it is a feasible plan.
Yes, there were days when we were frustrated. There were things that were so difficult to handle, somehow. But we kept on finding solutions to every challenge that came up every single day. Ours is a company which is managed by young and energetic people with motivation and the desire and passion to achieve something worthwhile, to make a difference in the construction sector.
Capital: Are you exerting extra effort and care for the construction of the 463 houses that you are constructing as it is your pilot project?
Fikremariam: Obviously! We are going the extra mile. We have incurred an extra 10 percent cost for the construction, considering as a promotional cost. By the way, 20 percent of the workforce employed in the building of these houses would be from Canada, Spain, USA, Australia, China and even some from Dubai. These guys would help us train the locals. By next year, however, we would only have five percent of foreigners for extra support. By the third year, we will not need people from abroad.
Capital: You said this ‘revolutionary’ technology would help lessen the housing problem for the society. And you also stated that the market is big enough to accommodate lots of new companies. Do you have plans to invite other companies to work with you?
Fikremariam: Currently, no. But in time we would definitely do that, because real estate companies want to increase revenue by reducing costs and delivering on their commitments as fast as possible. For these reasons, I hope they would approach us. If they don’t, we would approach them. If not, I think the market we have is enough for all of us. We don’t want to go and promote ourselves to other real estate companies, but we would like to cooperate with and educate those that show interest in the technology that we are employing. If this technology could be adopted by others, it could be very good for our people, the government, and for the companies themselves. We will also be sharing our technology with the Addis Ababa City Housing Development Agency, etc, so that it would be utilized and benefit as many people as possible.
Capital: How about reaching out to individuals involved in small projects like constructing houses for residential purposes and other uses on leased plots?
Fikremariam: We have a project plan to address this and we are working on it. Actually we have tried it last year by approaching people who have leased land and who came up with their own design. We held discussions on their designs and about rearranging it to fit the technology we are using. But the response at the time was not what we expected and few people were interested, but when such people become interested in the future, we will be ready to accommodate them. In the future, our plan is to come up with a total housing solution. It will be a difficult job but we will set up a technical team that can assist such people.
Capital: Who should do what so that your plans could be achieved?
Fikremariam: For one thing, we would like our shareholders to participate in our day-to-day activities and support us actively in what we do, as they are the key players in our company. Second, we need support from the government basically in two areas, but the most important one is availability of foreign currency right now, while the other is the issue of land where we need support to buy land at reduced prices and not the inflated prices we have right now which will allow us to sell houses at cheaper prices.